How a national drug plan can boost the Canadian economy

Canadians pay among the highest costs per capita among OECD countries for prescription drugs, with one Canadian out of 10 unable to fill their prescriptions because of financial reasons.

Marc-Andre Gagnon, Expert Advisor for the EvidenceNetwork.ca and assistant professor with the school of public policy and administration at Carlton University has written a fascinating article on the public and private economics of drug plan costs, it makes for a most informative read. You can read an excerpt below or click here to go directly to the article via National Newswatch website.

According to the recently released study, A Roadmap to a Rational Pharmacare Policy in Canada, commissioned by the Canadian Federation of Nurses Unions (CFNU) there are two main reasons why prescription drug costs are so expensive in Canada. First, we have a fragmented system with multiple public and private drug plans. In a fragmented system, attempts to reduce costs normally result in shifting the cost somewhere else in the system. Although provincial public plans have managed to significantly reduce drug costs since 2010 by reducing the price of generics and by negotiating confidential agreements with drug companies, there have been significant cost increases in private plans as drug companies and pharmacists seek compensation for their losses from public plans.

Second, according to the study Canadians pay artificially inflated prices for both brand-name drugs and generics in order to support the national pharmaceutical sector. But this strategy has not delivered what was promised: namely, investment and employment in Canada. Studies show that paying higher prices for drugs does not result in a thriving pharmaceutical sector in the country. Numbers alone tell the story; employment in the Canadian brand-name pharmaceutical sector went from 22,332 employees in 2003 to 14,990 in 2012.

Instead of eliminating this failed strategy, the federal governments plan appears to be to allow drug companies to increase drug costs further by permitting the extension of patents via a trade agreement with Europe. The presumption is that the Canadian pharmaceutical sector will thrive again, and more jobs for Canadians will be created. This goes against all the evidence.